Southern California

Company clears big hurdle in effort to operate in Costa Mesa’s medical marijuana business district

COSTA MESA – Shepard Investments, Inc., a company that wants to do business in the city’s voter-approved medical marijuana business district, on Monday, Nov. 27 became the first to clear a major hurdle.

The Planning Commission unanimously approved a conditional use permit for Chris Shepard, who wants to open a 7,315-square-foot facility at 3590 Cadillac Ave. that extracts oils from marijuana plants. The permit is one of a host of requirements the business must meet before it can operate legally in Costa Mesa.

Under the city’s Measure X, approved by voters last year, businesses that conduct research, testing, distribution and the manufacturing of medical marijuana products can open in an area west of Harbor Boulevard and north of the I-405. Dispensaries and retail sales are prohibited.

Several marijuana businesses are in various stages of the city’s applications process, which costs applicants around $49,000 in fees.

The Planning Commission discussed Shepard’s proposal for an hour before approving the permit. Commissioner Byron de Arakal expressed concerns about financial oversight of the mostly-cash business.

“I’m really concerned that if we’re going to get a 6 percent cut, we need to get a 6 percent cut of what’s actually sold,” he said, referring to a 6 percent annual tax imposed on marijuana businesses.

Transactions will be monitored by a point-of-sale tracking system as well as a bookkeeper and accountant, Shepard said.

“Other states do have banks that will take cash from marijuana businesses, but at this time I haven’t found one in the State of California yet,” he said.

Shepard still needs to secure finance, fire prevention and building safety approvals, a medical marijuana business permit and business license and approval from the state to operate after Jan. 1. before opening for business.

He said the site would be staffed by at least two employees at all times and include offices, a vault room, security cameras and up to four 25-ton rosin press machines, which use pressure and heat of up to 200 degrees to squeeze oils from the plants. Proposed business hours are 7 a.m.-5 p.m. Monday through Friday, he said.

Addressing security concerns, Shepard said the facility would not be storing large amounts of marijuana.

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“These presses press about two ounces at a time,” he said. “There won’t be very huge quantities coming in on a daily basis. It’s the simplest form of extraction.”

Shepard said he plans to add an extraction laboratory with other equipment sometime in the future that will need to go through a separate approval process.

The oils, which turn into a sticky solid substance within minutes of extraction, will be wrapped in parchment paper, placed inside envelopes and sold wholesale in one-gram quantities to marijuana retail dispensaries, he said.

Transportation of the product would go through an approved transport business.

Shepard said he plans to sell the marijuana byproduct to companies that use other types of machines to wring more oils, thereby reducing the amount of waste.

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Businesses in the medical marijuana business district will be required to limit signs to the name of the company with no references to marijuana, in either lettering or symbols, city officials said. No cannabis products can be visible from outside the property and no outdoor storage of marijuana or marijuana products are allowed.

Among other requirements, no cannabis can be consumed on the property and people younger than 21 will not be allowed in the area.

De Arakal said he doesn’t foresee that businesses distributing to unauthorized retailers will be “problematic,” adding that operators will need to “keep spotless books.”

“Basically, marijuana is going to be as easy to get as a bottle of Old Harper at the local liquor store,” he said. “I just want to make sure that the business operates securely and they look at doing business in Costa Mesa as a partnership with us and that we’re just not a governing body.”


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